The collapse of talks to cut America’s huge deficit reveals the chasm between
the Republicans and Democrats.

On Monday night, a congressional “super committee” announced that it had failed to agree on a way to reduce the US deficit by $1.2 trillion. Composed of six Republicans and six Democrats, it collapsed under the weight of ideological differences between the parties.

Politically, the winner of this debacle is Barack Obama, who will blame the Republicans for refusing to agree to significant tax increases. But the real loser is the American taxpayer. Not only have the Republicans and Democrats let them down, but their childish spat has exposed the true scope of the political and fiscal crisis facing America. The committee was a fraud: government spending is running wild and $1.2 trillion in savings would have done little to control it.

The committee was set up in August, after negotiations over how to tackle the debt crisis broke down. Republicans favoured spending cuts and reform of entitlements (unemployment and healthcare). Democrats preferred to repeal President George W Bush’s generous tax cuts. Part of the problem was that both sides were playing to their constituencies. It was hoped that a select panel of 12 could rise above the partisan fray and deliver a Solomonic solution.

But the issue of debt became too toxic for the committee to work. All of America’s divisions have boiled down to a debate over the size of government: Republicans think it’s too big and Democrats think it’s too small. Within the committee, the Democrats demanded that the Bush tax cuts go, while the Republicans insisted that repealing them would stall any recovery. The Republicans did offer their own suggestions for tax increases (roughly $640 billion of them), but demanded that these be met with cuts to popular welfare programmes. Republican Senator Rob Portman, of Oregon, summed up the impasse best: “We failed to reach agreement because… we simply couldn’t bridge fundamental policy differences that reflect a broader disagreement in the Congress and country as a whole over the size and scope of government.” America’s fiscal crisis is no longer driven by reality. It is motivated by near-religious hysteria, fatalism and blood feud. If anyone comes out of this looking good, it’s Obama. The president has long since given up being for anything; his healthcare reforms and jobs programme were big disappointments. But the collapse of the debt negotiations hands him the chance to be against something: serious cuts to welfare spending.

Congress now has a year to debate where the axe should fall before $1 trillion of automatic cuts start in 2013. This timetable dovetails with the election calendar, and we can expect Obama to lead the battle against Republican “attacks” on popular programmes. Out will go the Obama of the first three years of his administration: calm, balanced, bipartisan in tone. In will come Obama as Robin Hood: defender of the middle class, nemesis of the rich. It may begin to feel like Occupy Wall Street has decamped to the White House.

Obama’s game plan has precedent. In 1948, Democratic president Harry Truman won an against-the-odds re‑election campaign by painting a thrifty Republican Congress as mean and nasty. Bill Clinton did the same in 1996. This time, the strategy might get a hand from the Republican presidential candidates. The radical politics of the Republican contest favours extreme fiscal conservatives who want to abolish the federal government. The Republicans increasingly look like economic Neanderthals, while the president is sounding like the voice of reason.

But if Obama is the big winner, the average voter is the real loser. Investor confidence and the value of US shares have declined. The $1 trillion in automatic cuts will probably fall more unfairly on the poor than if an agreement had been reached that included tax increases. Congress looks broken; apathy will rise. Moreover, there’s a dawning realisation among the voters that US debt (which has just passed $15 trillion) is so out of control that politicians simply don’t know what to do about it.

The super-committee was discussing ways of reducing the deficit, not shrinking the size of the government in real terms. The difference is important. If a man pays down some of what he owes to a loan shark but then buys a new convertible, he is still spending too much. Likewise, the cuts that the committee were trying to find would not have dealt with the real problem: that the government is growing much faster than its citizens can afford. Even if the committee had succeeded in finding the $1.2 trillion it was looking for, the size of the federal debt would still have risen by nearly $2 trillion from 2011-2012.

What America needs is not a technocratic compromise but a bold reconsideration of spending priorities. Alas, trapped between a broken party system and a president prepared to do anything to get elected, the American people are unlikely to get it.